Signature Bank launches blockchain real-time payments

Yesterday New York-based Signature Bank announced it has approval from the NY State Department of Financial Services for its real-time blockchain-based payment platform. It enables commercial clients with minimum balances of $250,000 to make instant payments to other commercial clients of the same bank. The settlement is real-time and the system operates 24 hours a day, seven days a week.

But why is blockchain needed? Several European banks enable instant intra-bank transfers and have done so for many years. Though they usually have payment limits, but that’s more for security.

Nonetheless, the project is worthy of note. Firstly it was developed with trueDigital which was founded by Sunil Hirani. He also founded Creditex Group, the inter-dealer market for credit default swaps and bonds that was sold to ICE for $625 million in 2008. Additionally, he’s the co-founder of Digital Asset Holdings.

Secondly, it uses a digital currency, a Signet, to represent a USD on-chain to facilitate the instant settlement.

But also the comments from Sunil Hirani are illuminating: “The launch of Signet will address an obvious need that diverse ecosystems have for exchanging funds repeatedly with the same counterparty. This will significantly reduce costs, counterparty risk and settlement times.”

From Signature’s perspective, they have an interest in attracting new clients. “There are many commercial enterprises and transactions that benefit from real-time payments capabilities, such as the wholesale energy distribution market and over-the-counter institutional trade and settlement activities, just to name a few.” And Hirani currently manages CFTC-regulated interest rate swap exchange trueEX.

Two digital payments platforms are ripe for comparison. One is Ripple though that’s a more general interbank payments platform. The other is the yet-to-launch Utility Settlement Coin, which aims to play a similar role to Signet but for institutional settlements, and the money is held at a central bank.